BU5565 Assignment

Carbon prices - Coin" rel="nofollow">integration - Engle Granger procedureSUBMISSION DEADLINE: 07/03/2017, 5pm Word limit: 1000 words (excludin" rel="nofollow">ing tables).Please in" rel="nofollow">include word count. 1. Download dataset “Assignment.wf1" from MyAberdeen. The workfile contain" rel="nofollow">ins two time series: the logs of two carbon price series. LEUA is the log of the price for a pollution permit traded in" rel="nofollow">in the European Union Emission Tradin" rel="nofollow">ing Scheme; LCER is the log ofa so-called Certified Emission Reduction permit. The data is at daily frequency and the period of observation is 01/06/2007-30/12/201 1. This assignment deals with testin" rel="nofollow">ing if the two series are coin" rel="nofollow">integrated. 2. Describe the Engle Granger coin" rel="nofollow">integration test. 3. Use the full sample first. Perform the Engle Granger coin" rel="nofollow">integration test implemented in" rel="nofollow">in EViews. Write a short summary of your results and in" rel="nofollow">include the origin" rel="nofollow">inal EViews output. 4. Perform, for the full sample, the in" rel="nofollow">individual steps of the Engle Granger procedure (see e.g. the textbook by Walter Enders, page 335, Step 1 and Step 2, or Lecture 3, Slide 35, Step 1.).1 Write a short summary of your results and in" rel="nofollow">include origin" rel="nofollow">inal EViews outputs. Compare the results to those of question 3. 5. Now consider the shorter subsample 01/06/2007-30/06/2010. Redo question 3 and 4. Use a significance level of 10%. Discuss your results. 1. 1 Hin" rel="nofollow">int: residuals from a regression can be calculated usin" rel="nofollow">ing the Proc menu in" rel="nofollow">in the Equation object, “Make Residual Series" command. Please note that you do not need to estimate the error correction model.